Tin Bear Rally
Dear All,
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Below are the charts on LME tin that I promised to deliver; I hope they satisfy all the curious minds. A picture says a thousand words, but a picture in the wrong hands will say very little.
Quick disclaimer: charts that are shared here are by no means trading advice and do not imply that any historical pattern will repeat. There is no holy grail but rather we make an assessment of probable scenarios that very much depend on all the other little pieces coming together.
The above LME tin monthly chart is fairly self explanatory. Although there is a strong suggestion that the overall price action is likely to repeat itself, we are mindful that the macroeconomic backdrop and other external factors that formed the 2012-2015 price structure differ from the current ones.
That being said, we do like the probability from a technical perspective. LME tin produced a bearish monthly candle below the 50 MMA (similar to 2012) but the selling pressure eased before it could target the 100 MMA, forming what looks like a double bottom from the 2011 low.
Our short-term bullish case relies on LME tin price action in October producing a similar double bottom pattern off the March 2023 low.
The weekly chart offers a richer, magnified look at potential pivot zones. We look for key support areas that were respected by market participants. Again, historical price action offers clues but that does not mean the market will respect it again.
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With the confluence of the uptrend line and previous horizontal support that turned resistance and then turned support, we suspect that it offers a high probability of forming a new demand zone where dip buyers are lurking, with a low risk to reward play in mind.
Using the daily chart, one could pinpoint where the attractive demand zone lies. That zone comes in near the $22,950 to $23,250 area.
Again, we must stress that no matter how attractive the demand zone is, we already know that if LME tin breaks below $21,250 per tonne on the weekly close, that bullish view is no longer valid.There are external factors that could support our short-term bullish cause and they are:
1) Positive seasonality in Q4 2023 as restocking activity starts to emerge ahead of the new year - demand outlook for semiconductors turns less bearish.
2) US Fed (macro) is done with one last hike and dollar bulls may take a breather, allowing risk assets to appreciate.
3) Tin specific, surprise supply disruptions out of Myanmar Wa State could trigger a short-covering rally from LME fund managers.
4) Market participants have overestimated what China could deliver for the past nine months and they are bitterly disappointed. For the next six to nine months, those market participants are underestimating what China can do to promote its domestic consumption (sentiment).
Thank you for taking the time to read this article. Your feedback is very much appreciated.
Base Metals Research Analyst - Aluminium
1 年A snippet from Jeremy Pearce of ITA suggests several of the bullish dynamics are starting to emerge. Early indicators suggest more positive tin demand in H2, notably from China, alongside an inconsistent recovery in supply from Wa State and Indonesia. Dr Jeremy Pearce